Hedge Fund Urges Stilwell to Curb Pay

A hedge fund family that holds a large stake in Stilwell Financial Inc. on Monday urged the company -- operator of the Janus mutual fund family -- to rein in compensation for employees and reconsider selling its stake in DST Systems Inc.

In a letter to senior management, Boston-based Highfields Capital, now the second-biggest shareholder of Stilwell stock with 8% of the shares, made public for the first time its concerns about the company’s reorganization plans.

Stilwell is in the process of merging its operations under the roof of its Janus mutual fund unit. The company also has said it would review compensation and bonuses and look at selling its 33% stake in DST Systems, a provider of investment management services.

Stilwell has said it could use the proceeds from a sale of the DST stake to cut its debt.

But Highfields told Stilwell that it did not believe the company’s debt level was “excessive,” and called on management to take its time in deciding what to do with DST.

In the letter filed with the Securities and Exchange Commission, Highfields also called for “compensation restructuring.”

Still, Highfields said the company had taken “steps in the right direction.”

Janus responded to the letter Monday, saying Mark Whiston, who is to become chief executive of the restructured company, “would leave no stone unturned” in trying to make Janus more cost-efficient.

Shares of Kansas City, Mo.-based Stilwell closed at $13.58, up 4 cents, on the New York Stock Exchange on Monday. The stock has plunged 75% from its peak in 2000.

Highfields, which has a history of buying stakes in companies in an effort to bring about changes aimed at benefiting shareholders, has boosted its position in Stilwell in recent weeks.